MARTHA, MARTHA, MARTHA… Ms. Stewart may be “out of work” for a while, but Friday’s surprising Jobs Report indicates that she is not alone. The highly anticipated Employment Report was delivered Friday morning, and the shock waves quickly rippled around the globe. Wall Street estimates were looking for about 125,000 new job creations…and the actual numbers came in at a meager 21,000. Labor statistics indicate that the economy needs about 125,000 new jobs to be created monthly just to absorb new workers entering the labor force. Optimism had been quite high for job growth, so in the wake of the report, bad-news-loving Bonds blasted through the roof and caused mortgage interest rates to improve .125 to .25% on Friday alone!

This report also pushes back the likelihood of a previously anticipated summer rate hike by the Fed. The Federal Funds rate currently stands at 1.0% - its lowest level since 1958. The Fed knows that rates are too low for the long run. But with job creations so slow, Chairman Greenspan finds himself in Martha Stewart style…“handcuffed” from making changes anytime soon. Headed towards fall, the election will come into play, as the Fed will not want to be dragged into the political scene.

HAVE YOU CALLED A TECH SUPPORT LINE LATELY? BELIEVE IT OR NOT, IT IS HIGHLY LIKELY THAT THE FRIENDLY VOICE ON THE LINE WAS TALKING TO YOU FROM INDIA, WHERE MANY TECH SUPPORT JOBS HAVE BEEN “OUTSOURCED”. WITH U.S. JOB GROWTH SO SLOW, THE POLITICAL DEBATE ON SENDING JOBS OVERSEAS IS STARTING TO RAGE…BUT THERE IS FAR MORE TO THE STORY THAN MIGHT MEET THE EYE. DON’T MISS THIS WEEK’S MORTGAGE MARKET VIEW!

As Traders feel out the market in the wake of last Friday’s highly disappointing Jobs Report, the Retail Sales Report will take center stage this week. Retail Sales figures are a good indicator of how the average US consumer is feeling about the economy, and despite some wobbles on confidence over the past few months – consumer spending has been a major factor in driving the US economic recovery.

Take a look at the green “candle” on the far right side of the chart below, representing Friday’s major improvement in Bonds and interest rates. But…also take note that the upward motion was stopped in its tracks by the upper trend line of the “Bullish Channel” enjoyed over the past several months.

What will happen now that bond prices made such a huge jump higher? Traders who were lucky enough to have bought Bonds ahead of the Jobs Report are now sitting with some nice gains and will consider taking some of these profits “off of the table”, causing prices to level off. It will also be difficult for bond prices to break any higher with fairly low impact economic news coming this week.

Bottom Line: Mortgage interest rates should remain relatively stable this week as bond prices trade in mostly a sideways direction.

“Offshoring”…a term that to some, sounds like it might be a nice way to spend a leisurely Saturday afternoon at the beach, is quickly becoming a household term and a hot political issue.

Offshoring, outsourcing, or in common terms, “subcontracting” is not a new idea. Early on, outsourcing did not attract much attention, as corporations were typically sending jobs to other companies within US boundaries. But thanks to today’s incredible and affordable communications technology, US corporations are now playing in a global economy. This has spawned a great debate over the loss of American jobs versus the savings to corporations. Many economists argue that in order for companies to stay competitive in the global market they must adapt and hire foreign labor. Yet over the last several months, the lack of significant US job creation has re-ignited concerns. Especially with the Presidential election pending, a magnifying glass is being directed on this topic…and the heat is on.

While it is easy for candidates to gain political capital by blasting against any jobs going overseas, is this realistic? And more importantly, how does offshoring really impact the US economy? Let’s take a deeper look.

Thousands of companies have already begun offshoring, including two US titans, Delta airlines and Dell computer. Delta is anticipating a 12 to 15 million dollar savings from moving a part of its call center reservations operations to service centers in India. Delta argues the alternative could be catastrophic, as the only other solutions would call for labor union concessions or a reduction in fuel costs…both seeming to be unattainable or temporary, at best. In Delta’s case, the airline industry has struggled to remain afloat since 9/11, and it is not hard to believe that without offshore outsourcing, Delta could begin to run in the red and possibly be forced to close its doors…resulting in more unemployed US workers.

Another US giant, Dell Computers has also begun to outsource much of its IT department, in efforts to minimize costs and compete on a global scale. Many of Dells competitors such as Toshiba, Sony are already operating in cheaper markets, and offshoring allows Dell to level the playing field. Out of Dell’s 44,000 employees, approximately 54% are located outside of US borders today, but their increased profitability has improved Dell’s bottom line and kept more US workers employed.

So – what are the perils of offshoring? First, the human impact in terms of lost salary, homes, self-esteem, and general quality of life may be temporary issues, but create an immediate backlash for politicians and business owners.

Interestingly, according to a recent survey nearly 30 percent of companies saw no cost reductions or actually saw increased expenses as a result of outsourcing their IT work. Typically, the first several years have reaped little financial reward, as companies must make a significant investment in infrastructure, time and travel to get the overseas operation running. The additional impact on company morale, coupled with the costs of severance and retraining have made the initial move a costly one. In many cases, it is years down the road before profits begin to outweigh the initial expenditure, and provide a cost saving situation.

Further, many service companies are concerned about reports of unsatisfactory service. Language barriers or deep accents may be difficult for callers in search of assistance to understand. Additionally, the outsourcing company must bear in mind that different countries may not be required to follow US law in terms of confidentiality and intellectual property issues.

Regardless of the many opinions on the issue of offshoring, this issue will certainly continue to come under close examination, particularly as the election season nears.

Not too much action on the economic news front this week until Thursday, which brings the only real market mover of the week, the Retail Sales Report. This is a measure of the total sales receipts of retail stores, and the numbers are widely followed as an indicator of consumer spending patterns. Retail sales are often viewed excluding the autos component because vehicle sales are volatile, and can move sharply from month-to-month. Thursday also brings the closely watched weekly Initial Jobless Claims number, which will be under even more scrutiny than usual this week due to last weeks disappointing Jobs Report.

Remember, as a general rule, weaker than expected economic data would indicate the economy is not improving as quickly as expected, and could cause mortgage rates to improve. Positive data would indicate a strengthening economic climate, and could cause mortgage rates to gradually climb higher.

For the week of March 08 – March 12, 2004